Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least two points lower than your existing one? That may have been true a while back, but with refinancing dropping in cost recently, it's a good time to consider a new mortgage loan! A refinance is often worth its cost several times over, factoring in the advantages that can come, along with a reduced interest rate.

Benefits

You might be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with your refinanced loan. You might also have the ability to "cash out" some of the built-up equity in your home, that you may use to consolidate debts, improve your home, or finance a vacation. With lower rates, you may also get the chance to build your home equity more quickly by moving to a shorter-term loan.

Fees and Expenses

Of course, you will have to pay for your process of refinancing. With your refinance, you're paying for basically the same things you were charged for during your original mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying discount points can get you a better interest rate. Your savings on the life of the mortgage might be significant if you have paid up front about three percent of the new loan balance. We recommend that you consult with a tax professional before acting on hear-say that these points paid may be deducted on your taxes.

Speaking of taxes, once you reduce your interest rate, it follows that you will also be lowering the paid interest amount that you may deduct on your taxes. This is another expense that some borrowers take into account. Call us at 701.222.0100 to help you do the math.

Most borrowers find that the savings each month quickly outweigh the initial cost of a refinance. We will help you determine what program is perfect for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing might have on your taxes. Call us at 701.222.0100 to get started.

Curious about refinancing your home? Give us a call: 701.222.0100.

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